Auto Stocks Move Higher as Sliding Crude Oil Prices Benefit the Sector

Car and auto ancillary stocks saw buying momentum on June 26, as the Nifty Auto index gained close to 2%, driven by declining crude oil prices and better prospects for the vehicle manufacturing sector

The sectoral index rebounded after two consecutive days of decline, as 14 of its 15 stocks closed in the green.

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Uno Minda topped the performers in Nifty Auto stocks, up more than 4%. Maruti Suzuki India gained 3.71%, while Mahindra & Mahindra advanced 3.13%, making both companies among the top performers on the Nifty 50 index.

Auto Ancillaries Join the Rally

The positive sentiment extended across the auto components segment. Samvardhana Motherson International climbed 3.66%, while Bosch Ltd gained 2.37% during the session.

The rally reflected investor optimism that lower crude oil prices could ease cost pressures across the automotive supply chain. Crude-linked raw materials play a significant role in the production of tyres, plastics, synthetic materials and various vehicle components.

Tube Investments of India was the only stock within the Nifty Auto index to trade marginally lower.

Hero MotoCorp Gains After Brokerage Commentary

Hero MotoCorp rose around 3% after global brokerage CLSA reaffirmed its “Outperform” rating on the stock and maintained a target price of ₹5,728.

The brokerage stated that the company’s valuation reflects limited volume growth expectations despite a history of maintaining operating margins above 14%. CLSA also highlighted the potential benefits of new scooter launches and any future reduction in GST rates.

The brokerage noted that Hero MotoCorp has historically delivered volume growth while maintaining profitability and added that concerns regarding rainfall-related demand risks appear less significant based on historical trends.

Falling Oil Prices Support Outlook

The gains across the automobile sector coincided with another decline in global crude oil prices. Brent crude fell about 1.7% to around $72.5 per barrel, retreating to levels seen before the recent escalation of tensions between the U.S. and Iran.

There has been an improvement in oil prices, as the movement of ships through the Strait of Hormuz improved, and supply disruption fears subsided due to improvements in diplomatic relations.

For auto companies, declining oil prices may prove helpful in bringing down logistics and manufacturing expenses along with curbing inflationary pressures for consumers. Softening oil prices could make oil affordable, thus helping vehicle demand.

Declining crude prices have also boosted the sentiment of energy-sensitive industries with auto stocks being one of the major beneficiaries on the day. Investors will keep a close watch on the price fluctuations in oil as well as the forthcoming month’s auto sales numbers.